<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q


(Mark One)
(X)      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the quarterly period ended June 30, 1998.

( )      Transition report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period ______ to ______.

                           Commission File No. 1-13925

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                      ------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                      38-3389456
           --------                                      ----------
(State or other jurisdiction of                (IRS Employer Identification No.)
Incorporation or organization)

               755 West Big Beaver Rd., Suite 800, Troy, MI 48084
               --------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (248) 362-8800
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ]  No [  ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

         COMMON STOCK $0.01 PAR VALUE                15,171,666 SHARES
         ----------------------------                -----------------
                    CLASS                     OUTSTANDING AT AUGUST 1, 1998

                         This report contains 20 pages.

                                       1
<PAGE>   2
<TABLE>
                                        TABLE OF CONTENTS

<CAPTION>
PART I - FINANCIAL INFORMATION                                                             PAGE
<S>           <C>                                                                           <C>
     ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS.

              Consolidated Balance Sheets at June 30, 1998 and December 31, 1997             3

              Consolidated Statements of Operations for the Three and Six Months Ended
              June 30, 1998 and 1997                                                         4

              Consolidated Statement of Stockholders' Equity (Deficit) for the Six
              Months Ended June 30, 1998                                                     5

              Consolidated Statements of Cash Flows for the Six Months Ended
              June 30, 1998 and 1997                                                         6

              Notes to Consolidated Financial Statements                                     7


     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS.                                13

PART II - OTHER INFORMATION

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.                                             19

     SIGNATURES                                                                             20
</TABLE>

                                               2
<PAGE>   3
<TABLE>
                                 CHAMPIONSHIP AUTO RACING TEAMS, INC.
                                     CONSOLIDATED BALANCE SHEETS
                              AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
                                            (IN THOUSANDS)
<CAPTION>
ASSETS                                                              JUNE 30, 1998  DECEMBER 31, 1997
                                                                    -------------  -----------------
                                                                     (Unaudited)
<S>                                                                   <C>              <C>     
Current assets:
   Cash and cash equivalents                                          $ 39,931         $  1,164
   Short-term investments                                               32,066               --
   Accounts receivable (net of allowance of $231 and $0 at
       June 30, 1998 and December 31, 1997, respectively)               12,367            3,156
   Current portion of notes receivable                                     845               --
   Prepaid expenses                                                        667              751
   Inventory                                                               110               --
   Deferred income taxes                                                   376            4,683
                                                                      --------         --------
     Total current assets                                               86,362            9,754

Notes receivable                                                         3,432               49

Property and equipment (net)                                             5,191            2,236

Other assets (net)                                                       5,598              309
                                                                      --------         --------
     Total assets                                                     $100,583         $ 12,348
                                                                      ========         ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Accounts payable                                                   $  1,890         $  1,889
   Accrued liabilities:
       Race expenses and point awards                                    1,653            9,500
       Taxes                                                               593              491
       Other                                                             1,907              724
   Unearned revenue                                                     16,022            2,352
   Current portion of long-term debt                                       130              130
                                                                      --------         --------
     Total current liabilities                                          22,195           15,086

Long-term debt                                                             249              314

Deferred income taxes                                                       54               --

Minority interest                                                          (44)              (7)

Stockholders' equity (deficit)
    Preferred Stock, $.01 par value; 5,000,000 shares
       authorized, none issued and outstanding at June 30,
       1998 and December 31, 1997
    Common stock, $.01 par value; 50,000,000 shares
       authorized, 15,171,666 and 10,199,998 shares issued
       and outstanding at June 30, 1998 and December 31, 1997,
       respectively                                                        151              102
   Additional paid-in capital                                           89,221           15,975
   Accumulated deficit                                                 (11,304)         (19,122)
   Unrealized gain on investments                                           61               --
                                                                      --------         --------
       Total stockholders' equity (deficit)                             78,129           (3,045)
                                                                      --------         --------

       Total liabilities and stockholders' equity (deficit)           $100,583         $ 12,348
                                                                      ========         ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                        3
<PAGE>   4
<TABLE>
                                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                                   (UNAUDITED)
                                    (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<CAPTION>
                                                             THREE MONTHS                    SIX MONTHS
                                                             ENDED JUNE 30,                 ENDED JUNE 30,
                                                          1998           1997            1998            1997
                                                        -------        -------         -------         -------
<S>                                                     <C>            <C>             <C>             <C>    
REVENUES:

         Sanction fees                                  $10,251        $12,546         $15,243         $13,953
         Sponsorship revenue                              4,603          2,342           7,763           4,319
         Television revenue                               1,911          2,276           2,458           2,627
         Engine leases, rebuilds and wheel sales            755             --             954              --
         Other                                            2,514          1,540           3,647           3,168
                                                        -------        -------         -------         -------

         Total revenues                                  20,034         18,704          30,065          24,067

EXPENSES:

         Race and franchise fund distributions            5,486         13,919           6,874          15,560
         Race expenses                                    1,304          2,321           2,135           3,440
         Cost of engine rebuilds and wheel sales            241             --             304              --
         Administrative and indirect expenses             5,966          3,972           9,411           5,650
         Depreciation and amortization                      188            117             329             220
         Minority interest                                   17            (15)            (37)           (217)
                                                        -------        -------         -------         -------

         Total expenses                                  13,202         20,314          19,016          24,653

OPERATING INCOME (LOSS)                                   6,832         (1,610)         11,049            (586)
         Interest income (net)                              968            140           1,234             192
                                                        -------        -------         -------         -------
INCOME (LOSS) BEFORE INCOME TAXES                         7,800         (1,470)         12,283            (394)
         Income tax expense (benefit)                     2,847           (240)          4,465             (52)
                                                        -------        -------         -------         -------
NET INCOME (LOSS)                                       $ 4,953        $(1,230)        $ 7,818         $  (342)
                                                        =======        =======         =======         =======
         EARNINGS PER SHARE:
                       BASIC                            $  0.33        $ (0.12)        $  0.59         $ (0.03)
                                                        =======        =======         =======         =======
                       DILUTED                          $  0.32        $ (0.12)        $  0.59         $ (0.03)
                                                        =======        =======         =======         =======
        WEIGHTED AVERAGE SHARES OUSTANDING:
                       BASIC                             15,172         10,200          13,191          10,200
                                                        =======        =======         =======         =======
                       DILUTED                           15,336         10,200          13,291          10,200
                                                        =======        =======         =======         =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                       4
<PAGE>   5
<TABLE>
                                            CHAMPIONSHIP AUTO RACING TEAMS, INC.
                                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                                         (UNAUDITED)
                                                       (IN THOUSANDS)
<CAPTION>
                                        Common Stock          Additional                     Unrealized
                                   ---------------------       Paid-In         Accumulated     Gain on      Stockholders'
                                    Shares        Amount       Capital           Deficit     Investments   Equity(Deficit)
                                   -------        ------      ----------       -----------   -----------   ---------------
<S>                                <C>             <C>          <C>             <C>              <C>          <C>     
BALANCES, DECEMBER 31, 1997        $10,200         $102         $15,975         $(19,122)        $--          $(3,045)

Unrealized gain                         --           --              --               --          61               61

Net income                              --           --              --            7,818          --            7,818

Stock redemption                       (67)          (1)           (150)              --          --             (151)

Stock issuance (net of
issuance costs)                      5,038           50          73,396               --          --           73,446
                                   -------         ----         -------         --------         ---          -------

BALANCES, JUNE 30, 1998            $15,171         $151         $89,221         $(11,304)        $61          $78,129
                                   =======         ====         =======         ========         ===          =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                       5
<PAGE>   6
<TABLE>
                                  CHAMPIONSHIP AUTO RACING TEAMS, INC.
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                               (UNAUDITED)
                                             (IN THOUSANDS)
<CAPTION>
                                                                               1998             1997
                                                                             --------         --------
<S>                                                                          <C>              <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                         $  7,818         $  (342)
   Adjustments to reconcile net income (loss) to net cash provided by
   operating activities:
      Depreciation and amortization                                               329             220
      Gain from sale of property and equipment                                     (6)           (158)
      Deferred income taxes                                                     4,361             (54)
      Minority interest in loss of subsidiaries                                   (37)           (217)
      Changes in assets and liabilities that (used) provided cash:
         Accounts receivable                                                   (9,211)         (5,960)
         Prepaid expenses                                                          84              73
         Inventory                                                               (110)             (1)
         Other assets                                                              10              57
         Accounts payable                                                           1           1,139
         Accrued liabilities                                                   (6,562)          6,388
         Unearned revenue                                                      13,670           8,373
                                                                             --------         -------

                         Net cash provided by operating activities             10,347           9,518

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisitions                                                                (5,315)             --
   Purchase of short-term investments                                         (32,005)             --
   Issuance of notes receivable (net)                                          (4,228)             --
   Acquisition of property and equipment                                       (3,309)           (613)
   Proceeds from sale of property and equipment                                    62              --
   Acquisition of trademark                                                       (15)            (25)
                                                                             --------         -------

                         Net cash used in investing activities                (44,810)           (638)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on long-term debt                                                     (65)            (76)
   Issuance of common stock (net)                                              73,446             840
   Redemption of common stock                                                    (151)           (210)
   Capital contributions to subsidiaries by minority stockholder                                  225
                                                                             --------         -------

                         Net cash provided by financing activities             73,230             779
                                                                             --------         -------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                      38,767           9,659

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                1,164             630
                                                                             --------         -------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                   $ 39,931         $10,289
                                                                             ========         =======

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Income taxes                                                                 none            none
                                                                             ========         =======
    Interest                                                                 $     17         $    30
                                                                             ========         =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                        6
<PAGE>   7
                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.   BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying unaudited consolidated financial
statements have been prepared by management and, in the opinion of management,
contain all adjustments, consisting of normal recurring adjustments, necessary
to present fairly the financial position of Championship Auto Racing Teams, Inc.
and subsidiaries (the "Company") as of June 30, 1998 and the results of its
operations and its cash flows for the three months and six months ended June 30,
1998 and 1997.

The unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements included in the Company's
registration statement filed on Form S-1 with the Securities and Exchange
Commission.

Because of the seasonal concentration of racing events, the results of
operations for the three months and six months ended June 30, 1998 and 1997 are
not indicative of the results to be expected for the year.

Principles of Consolidation - The 1997 consolidated financial statements include
the financial statements of CART, Inc. (a Michigan corporation) and its
wholly-owned subsidiary corporations CART Properties, Inc. and CART Licensed
Products, Inc. In addition, the 1997 consolidated financial statements include
the financial statements of CART Licensed Products, L.P., a 55% owned
subsidiary. As of March 13, 1998, and April 1, 1998, the consolidated unaudited
financial statements also include the financial statements of American Racing
Series, Inc. ("ARS"), a wholly-owned subsidiary and Pro-Motion Agency Ltd.
("Pro-Motion"), a wholly-owned subsidiary, respectively (see Note 2). All
significant intercompany balances have been eliminated in consolidation.

Revenue Recognition - As of January 1, 1998, the Company changed its method of
accounting for revenue recognition for certain other revenue. Previously, other
revenue was recognized when received, with the majority being received in the
first quarter of the year with the commencement of the race season. Under the
new method, the Company will recognize these revenues pro-rata over the race
season. The Company believes the new method is preferable as it provides a
better matching of revenues and expenses.

Earnings Per Share - Basic earnings per share ("EPS") excludes dilution and is
computed by dividing earnings available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
assumes the issuance of common stock for all potentially dilutive equivalent
shares outstanding.

Short-term Investments - The Company's short-term investments are categorized as
available-for-sale, as defined by Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"

                                       7
<PAGE>   8
                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

("SFAS No. 115"). Unrealized holding gains and losses are reflected as a net
amount in a separate component of stockholders' equity until realized. For the
purpose of computing realized gains and losses, cost is identified on a specific
identification basis.

Other Assets - Other assets consist mainly of goodwill, representing the excess
of the purchase price of ARS and B.P. Automotive, Ltd. ("BP") and Pro-Motion
(see Note 2) over the net tangible and identifiable intangible assets of these
acquisitions. Goodwill is stated at cost and is amortized on a straight-line
basis over 40 years.

Accounting Pronouncements - The Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," beginning
January 1, 1998. The effect of this pronouncement is not material to the
Company's financial statements.

Reclassifications - Certain reclassifications have been made to the 1997
consolidated financial statements in order for them to conform to the 1998
presentation.


2.   INITIAL PUBLIC OFFERING AND ACQUISITIONS

Initial Public Offering - In March 1998, the Company completed its initial
public offering ("IPO") of 5,038,000 shares of common stock (including 705,000
shares issued upon exercise of the underwriters' over allotment option). The
initial offering price was $16 per share with proceeds to the Company of $74.9
million, net of underwriting discount. A portion of the net proceeds from the
IPO were used to acquire ARS and BP for $10 million (see Acquisition of ARS and
BP), and to pay accrued point awards to franchise race teams aggregating $9.5
million. The remaining net proceeds will be used for working capital and general
corporate purposes, including the expansion of the Company's business through
the acquisition or development of race related businesses and properties.

Acquisition of ARS and BP - On March 13, 1998, the Company acquired 100% of the
outstanding common stock of ARS and certain assets of BP (entities related
through certain common ownership). ARS operates the PPG-Dayton Indy Lights
Championship ("Indy Lights"), a support series to CART. BP supplies certain
equipment to Indy Lights competitors and earns commission income on the sale of
chassis and spare parts to the teams. At closing of the acquisition, the Company
paid $7 million in cash and issued options to purchase 100,000 shares of the
Company's common stock at an exercise price of $16.00 per share which vests one
year from closing if certain performance criteria are met for 1998. In addition,
the Company will pay an additional purchase price of up to $3 million upon
satisfaction by ARS of certain performance criteria during 1998-2000. The excess
of the initial purchase price of $7 million over the net book value of the net
assets acquired has been allocated to the tangible and intangible assets based
on the Company's estimate of the fair market value of the net assets acquired.
The operating results of ARS and BP have been included in the Company's
financial statements since the date of acquisition.

                                       8
<PAGE>   9
                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Acquisition of Pro-Motion - On April 10, 1998, the Company acquired 100% of the
outstanding common stock of Pro-Motion, an entity previously owned by a director
of the Company, a race team owner and stockholder for $533,700 in cash.
Pro-Motion operates the KOOL/Toyota Atlantic Championship open-wheel series, a
support series to CART. The excess of the initial purchase price over the net
book value of the net assets acquired has been allocated to the tangible and
intangible assets based on the Company's estimate of the fair market value of
the net assets acquired. The operating results of Pro-Motion have been included
in the Company's financial statements since April 1, 1998.

Pro forma Results - The following unaudited pro forma summary for the three
months and six months ended June 30, 1998 and 1997 assume the acquisitions of
ARS, BP and Pro-Motion occurred as of January 1, 1997.

<TABLE>
<CAPTION>
                                                                    Three Months                   Six Months
                                                                   Ended June 30,                Ended June 30,
                                                                 1998           1997           1998           1997
                                                                 ----           ----           ----           ----
                                                                     (In Thousands, Except Earnings Per Share)
       ------------------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>            <C>    
       Revenues                                                $20,034        $20,842        $31,398        $26,599
       Net Income                                                4,980          5,102          8,084          6,023
       Earnings per share:
            Basic                                              $   .33        $   .48        $   .59        $   .57
                                                               =======        =======        =======        =======
            Diluted                                            $   .32        $   .48        $   .59        $   .57
                                                               =======        =======        =======        =======
       Weighted Average Shares Outstanding:
            Basic                                               15,172         10,638         13,629         10,638
                                                               =======        =======        =======        =======
            Diluted                                             15,336         10,638         13,728         10,638
                                                               =======        =======        =======        =======
       ------------------------------------------------------------------------------------------------------------
</TABLE>

Pro forma adjustments for the periods presented have also been made to reduce
certain benefits paid to franchise members, including the reimbursement of
travel expenses, director's fees and other race related payments in connection
with the Company's reorganization, effective January 1, 1998. Additional cost
savings that the Company expects to realize through the integration of the ARS,
BP and Pro-Motion acquisitions have not been included.


3.   STOCK OPTION PLAN

In December 1997, the Board of Directors of the Company (the "Board")
authorized, and the stockholders of the Company approved, a stock incentive plan
for executive and key management employees of the Company and its subsidiaries,
including a limited number of outside consultants and advisors, effective as of
the completion of the IPO (the "Stock Option Plan"). Under the Stock Option
Plan, key employees, outside consultants and advisors (the "Participants") of
the Company and its subsidiaries (as defined in the Stock Option Plan) may
receive awards of stock options (both Nonqualified Options and Incentive
Options, as defined in the Stock Option Plan). A maximum of 2,000,000 shares of
common stock will be subject to the Stock Option Plan. Options granted will vest
pro-rata over a three-year period. No stock option may be exercisable after ten

                                       9
<PAGE>   10
                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


years from the date of the grant, subject to certain conditions and limitations.
The purpose of the Stock Option Plan is to provide the Participants (including
officers and directors who are also key employees) of the Company and its
subsidiaries with an increased incentive to make significant contributions to
the long-term performance and growth of the Company and its subsidiaries.
Concurrent with the IPO, an aggregate 1,088,100 options to acquire common stock
were granted under the Stock Option Plan at the initial offering price of $16.00
per share.

In addition, in December of 1997, the Board and the stockholders of the Company
approved a Director Option Plan permitting the granting of non-qualified stock
options ("Director NQSOs") for up to 100,000 shares of common stock to directors
of the Company who are neither employees of the Company nor affiliates of a race
team which participates in CART race events (an "Independent Director"). Each
person who is first elected or appointed to serve as an Independent Director of
the Company is automatically granted an option to purchase 10,000 shares of
Company common stock. In addition, each individual who is re-elected as an
Independent Director is automatically granted an option to purchase 5,000 shares
of Company common stock each year on the date of the annual meeting of
stockholders. Each of the options automatically granted upon election,
appointment or re-election as an Independent Director are exercisable at a price
at least equal to the fair market value of the common stock on the date of
grant. In addition, each Independent Director may elect to receive stock options
in lieu of any director's fees payable to such individuals.

All Director NQSOs are immediately exercisable upon grant. The exercise price
for all options may be paid in cash, shares of common stock or other property.
If an Independent Director dies or becomes ineligible to participate in the
Director Option Plan due to disability, his Director NQSOs expire on the first
anniversary of such event. If an Independent Director retires with the consent
of the Company, his Director NQSOs expire 90 days after his retirement. In no
event may a Director NQSO be exercised more than ten years from the date of
grant. As of June 30, 1998, there were 10,000 Director NQSOs issued and
outstanding.

                                       10
<PAGE>   11
                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4.   PROPERTY AND EQUIPMENT

Property and equipment consists of the following at June 30, 1998 and December
31, 1997.

                                            JUNE 30, 1998  DECEMBER 31, 1997
                                                (Unaudited) (In Thousands)
                                            --------------------------------
         Engines                               $ 2,296         $    --
         Machinery and office equipment          2,591           1,899
         Vehicles                                1,831           1,616
         Tooling                                    13              --
         Leasehold improvements                      1               1
         Construction in progress                   --              65
         Pop-off valves                            253             162
                                               -------         -------

         Total                                   6,985           3,743

         Less accumulated depreciation          (1,794)         (1,507)
                                               -------         -------

         Property and equipment (net)          $ 5,191         $ 2,236
                                               =======         =======


5.   SHORT-TERM INVESTMENTS

The following is a summary of the estimated fair value of available for sale
short-term investments by balance sheet classification:

JUNE 30, 1998                                                  GROSS UNREALIZED
                                                               ----------------
(IN THOUSANDS) (UNAUDITED)          COST       FAIR VALUE      GAIN       LOSS
------------------------------------------------------------------------------

U.S. Treasury securities          $ 2,499       $ 2,499        $--        $ --

U.S. agencies securities           21,009        21,002         --          (7)

Corporate bonds                     8,574         8,565         --          (9)
                                  -------       -------        ---        ----

Total short-term investments      $32,082       $32,066        $--        $(16)
                                  =======       =======        ===        ====

Contractual maturities range from less than one year to two years. The weighted
average maturity of the portfolio does not exceed one year.

                                       11
<PAGE>   12
                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


6.   COMMON STOCK

In March 1998, at the request of a race team owner, the Company rescinded the
sale of an aggregate of 66,666 shares of common stock it issued in December 1997
at a total price of $151,000.

7.   NOTES RECEIVABLE

In May 1998, the Company entered into an agreement with a promoter whereby the
Company provided financing for a CART sanctioned event in Brazil. The note
receivable of $4.2 million relating to costs incurred by the Company during the
1998 event will be repaid in five equal yearly installments over the life of the
sanction agreement. The note receivable has a stated 5% per annum interest rate
and is secured by letters of credit issued by the City of Rio de Janeiro,
Brazil.

8.   COMMITMENT

In June 1998, the Company entered into a nine year agreement with ISL Worldwide
("ISL"). The contract appoints ISL as the Company's exclusive worldwide
marketing agent for the sale of all sponsorships of its open wheel racing
series, the FedEx Championship Series, the PPG-Dayton Indy Lights Championship,
and the KOOL/Toyota Atlantic Championship.

                                       12
<PAGE>   13
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS.


OVERVIEW

         The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with the consolidated
financial statements of the Company, including the respective notes thereto
which are included in this Form 10-Q.

THE REORGANIZATION

         The Company was formed in December 1997 to serve as a holding company
for CART, Inc. and its subsidiaries. CART, Inc. previously issued 25.5 shares of
its common stock to racing teams who met certain participation requirements.
Each outstanding share of common stock of CART, Inc. was acquired by the Company
in exchange for 400,000 shares of common stock of the Company (the
"Reorganization"). The Reorganization was completed in anticipation of, and to
facilitate the IPO. As part of the Reorganization and pursuant to a three-year
agreement among each of the Company's current stockholders, effective January 1,
1998, the payment of certain items to franchise members including reimbursement
of travel expenses on a per race basis, directors fees and other race-related
payments were discontinued.

RESULTS OF OPERATIONS

Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997

         Revenues. Total revenues for the quarter ended June 30, 1998 were $20.0
million, an increase of $1.3 million, or 7% from the same period in the prior
year. This increase was due to higher sponsorship revenue, engine leases,
rebuilds and wheel sales, and other revenue, partially offset by a decrease in
sanction fees and television revenue, as described below.

         Sanction fees for the quarter ended June 30, 1998 were $10.3 million, a
decrease of $2.3 million, or 18%, from the same period in the prior year. This
decrease was the result of seven events taking place in the second quarter of
1998 compared to eight events in the same period in the prior year.

         Sponsorship revenue for the quarter ended June 30, 1998 was $4.6
million, an increase of $2.3 million, or 97%, from the same period in the prior
year. This increase was primarily attributable to a new sponsorship agreement
entered into with Federal Express, an agreement with ISL Worldwide that
guarantees certain sponsorship income and the additional sponsorship revenues
attributable to the acquisition of ARS in March 1998 and Pro-Motion in April
1998.

         Television revenue for the quarter ended June 30, 1998 was $1.9
million, a decrease of $365,000, or 16%, from the same period in the prior year.
Television revenue is recognized on a per race basis. The per race revenue
recognition for television has decreased in 1998 compared to 1997, as the total
number of races has increased from 17 races to 19 races in 1998, thereby,
decreasing the per race revenue accrual. The additional races will be held in
the third and fourth quarters. Also, the decrease in television revenue was
partially due to seven races being held in the second quarter of 1998 compared
to eight races in the same period in the prior year.

                                       13
<PAGE>   14
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

         Engine leases, rebuilds and wheel sales revenue for the quarter ended
June 30, 1998 was $755,000. There is no corresponding revenue in the prior
period as this revenue was earned by ARS, which was acquired in March 1998.

         Other revenue for the quarter ended June 30, 1998 was $2.5 million, an
increase of $1.0 million, or 63%, from the same period in the prior year. This
increase was partially attributable to a change in accounting method for
membership and credential revenue. In 1997, membership and credential revenue
was recognized when the income was received, mainly in the first quarter. During
1998, the income is accrued over the race season to reflect this income as it is
earned and to record these revenues at the time of recording corresponding
expenses. In addition, the increase is partially due to the Reorganization that
was effective January 1, 1998. As part of the Reorganization, the Company now
receives membership income from franchise members and is recognizing this income
over the race season. Finally, the increase in other revenue was also from an
increase in net royalty revenues related to the Company's expanded licensed
products venture and additional other revenues from ARS and Pro-Motion that did
not exist in the same period in the prior year.

         Expenses. Total expenses for the quarter ended June 30, 1998 were $13.2
million, a decrease of $7.1 million, or 35%, from the same period in the prior
year. This decrease was due to a decrease in race distributions and race
expenses, partially offset by an increase in administrative and indirect
expenses as described below.

         Race distributions for the quarter ended June 30, 1998 were $5.5
million, a decrease of $8.4 million, or 61%, from the same period in the prior
year. This decrease is partially due to the Reorganization that was effective
January 1, 1998. In 1997, certain payments were made to franchise members that
have been discontinued for the 1998 season. The decrease was also due to seven
races being held in the second quarter of 1998 compared with eight races held in
the same period in the prior year.

         Race expenses for the quarter ended June 30, 1998 were $1.3 million, a
decrease of $1.0 million, or 44%, from the same period in the prior year. This
decrease is partially due to the Reorganization that was effective on January 1,
1998. In 1997, certain payments were made to franchise members that have been
discontinued for the 1998 season. The decrease was also due to seven races being
held in the second quarter of 1998 compared with eight races held in the same
period in the prior year. The decrease is partially offset by the increase in
race expenses from ARS and Pro-Motion that were not included in the same period
in the prior year as these companies were acquired in 1998.

         Cost of engine rebuilds and wheel sales for the quarter ended June 30,
1998 were $241,000. There is no corresponding expense in the prior period as
this expense is from ARS and BP, which were acquired in March 1998.

         Administrative and indirect expenses for the quarter ended June 30,
1998 were $6.0 million, an increase of $2.0 million, or 50%, from the same
period in the prior year. This was primarily attributable to an increase in
marketing and advertising, sales costs related to sponsor sales, development of
a creative services department in 1998 and increased administrative expenses

                                       14
<PAGE>   15
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


related to the Company's expanded licensed products venture. The addition of ARS
and Pro-Motion administrative expenses contributed to the increase, as there
were no corresponding expense in the prior period since these companies were
acquired in 1998.

         Operating income for the quarter ended June 30, 1998 was $6.8 million,
an increase in income of $8.4 million from the corresponding period in the prior
year due to the factors described above.

         Interest income (net) for the quarter ended June 30, 1998 was $968,000,
compared to interest income (net) of $140,000 for the corresponding period in
the prior year. The increase of $828,000 or 591% is primarily attributable to
interest earned on the invested proceeds from the initial public offering that
occurred in March 1998.

         Income tax expense for the quarter ended June 30, 1998 was $2.8
million, compared to income tax benefit of $240,000 for the corresponding period
in the prior year.

          Net income for the quarter ended June 30, 1998 was $5.0 million, an
increase of $6.2 million from the corresponding period in the prior year as a
result of the factors described above.


Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

         Revenues. Total revenues for the six months ended June 30, 1998 were
$30.1 million, an increase of $6.0 million, or 25% from the same period in the
prior year. This increase was due to higher sanction fees, sponsorship, engine
leases, rebuilds and wheel sales, and other revenue, as described below.

         Sanction fees for the six months ended June 30, 1998 were $15.2
million, an increase of $1.3 million, or 9%, from the same period in the prior
year. This increase was due to annual sanction fee escalations for certain
events from 1997 to 1998.

         Sponsorship revenue for the six months ended June 30, 1998 was $7.8
million, an increase of $3.4 million, or 80%, from the same period in the prior
year. This increase was primarily attributable to a new sponsorship agreement
entered into with Federal Express, an agreement with ISL Worldwide that
guarantees certain sponsorship income and the additional sponsorship revenues
attributable to the acquisition of ARS in March 1998 and Pro-Motion in April
1998.

         Television revenue for the six months ended June 30, 1998 was $2.5
million, a decrease of $169,000, or 6%, from the same period in the prior year.
Television revenue is recognized on a per race basis. The decrease in television
revenue was due to a decrease in the per race revenue recognition, as the total
number of races has increased from 17 races to 19 races in 1998, thereby,
decreasing the per race revenue accrual. The additional races will be held in
the third and fourth quarters.

                                       15
<PAGE>   16
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


         Engine leases, rebuilds and wheel sales revenue for the six months
ended June 30, 1998 was $954,000. There is no corresponding revenue in the prior
period as this revenue was earned by ARS, which was acquired in March 1998.

         Other revenue for the six months ended June 30, 1998 was $3.6 million,
an increase of $479,000, or 15%, from the same period in the prior year. The
increase was due to an increase in net royalty revenues related to the Company's
expanded licensed products venture and additional other revenues from ARS and
Pro-Motion that did not exist in the same period in the prior year as they were
not acquired until 1998. In addition, the increase is partially due to the
Reorganization that was effective January 1, 1998. As part of the
Reorganization, the Company now receives membership income from franchise
members and is recognizing this income over the race season. This overall
increase was partially offset by a decrease due to a change in accounting method
for membership and credential revenue. In 1997, membership and credential
revenue was recognized when the income was received, mainly in the first
quarter. During 1998, the income is accrued over the race season to reflect this
income as it is earned and to record these revenues at the time of recording
corresponding expenses.

         Expenses. Total expenses for the six months ended June 30, 1998 were
$19.0 million, a decrease of $5.6 million, or 23%, from the same period in the
prior year. This decrease was due to a decrease in race distributions, partially
offset by an increase in administrative and indirect expenses as described
below.

         Race distributions for the six months ended June 30, 1998 were $6.9
million, a decrease of $8.7 million, or 56%, from the same period in the prior
year. This decrease is due to the Reorganization that was effective January 1,
1998. In 1997, certain payments were made to franchise members that have been
discontinued for the 1998 season.

         Race expenses for the six months ended June 30, 1998 were $2.1 million,
a decrease of $1.3 million, or 38%, from the same period in the prior year. This
decrease is due to the Reorganization that was effective on January 1, 1998. In
1997, certain payments were made to franchise members that have been
discontinued for the 1998 season. The decrease is partially offset by the
increase in race expenses from ARS and Pro-Motion that were not included in the
same period in the prior year as these companies were acquired in 1998.

         Cost of engine rebuilds and wheel sales for the six months ended June
30, 1998 were $304,000. There is no corresponding expense in the prior period as
this expense is from ARS and BP, which were acquired in March 1998.

         Administrative and indirect expenses for the six months ended June 30,
1998 were $9.4 million, an increase of $3.8 million, or 67%, from the same
period in the prior year. This was primarily attributable to an increase in
marketing and advertising, sales costs related to sponsor sales, development of
a creative services department in 1998 and increased administrative expenses
related to the Company's expanded licensed products venture. In addition, ARS
and Pro-Motion administrative expenses contributed to the increase, as there are
no corresponding expenses in the prior period since these companies were
acquired in 1998.

                                       16
<PAGE>   17
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


         Operating income for the six months ended June 30, 1998 was $11.0
million, an increase of $11.6 million from the corresponding period in the prior
year due to the factors described above.

         Interest income (net) for the six months ended June 30, 1998 was $1.2
million, compared to interest income (net) of $192,000 for the corresponding
period in the prior year. The increase of $1.0 million or 543% is primarily
attributable to interest earned on the invested proceeds from the initial public
offering that occurred in March 1998.

         Income tax expense for the six months ended June 30, 1998 was $4.5
million, compared to income tax benefit of $52,000 for the corresponding period
in the prior year.

         Net income for the six months ended June 30, 1998 was $7.8 million, an
increase of $8.2 million, from the corresponding period in the prior year as a
result of the factors described above.

SEASONALITY AND QUARTERLY RESULTS

         The Company derives a substantial portion of its total revenues during
the CART Championship season. As a result, the Company's business has been, and
is expected to remain, seasonal, based upon the CART Championship schedule. The
Company's quarterly results vary relative to the number of races held during the
quarter. In addition, the mix between the type of race (street course,
superspeedway, etc.), its location and the sanction fees attributed to those
races will affect quarterly results.

         The revenues from any race in the CART Championship will significantly
affect the Company's results of operations for a particular quarter.
Consequently, changes in race schedules from year to year, with races held in
different quarters, will result in fluctuations in quarterly results and affect
comparability.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has relied on cash flow from operations, supplemented by
bank borrowings, to finance working capital, investments and capital
expenditures.

         The Company's bank borrowing with a commercial bank consists of a fixed
rate installment note incurred in connection with the acquisition of a mobile
medical unit that is transported to each North American race. The note bears
interest at a rate of 8.25% per annum and matures on May 1, 2001. The note is
secured by the Company's mobile medical unit. Interest is payable monthly. As of
June 30, 1998, the current portion of this note was $130,000 and the long-term
portion was $249,000.

         The Company also has a $1.5 million revolving line of credit with a
commercial bank. As of June 30, 1998, there was no outstanding borrowing under
the line of credit. The line of credit contains no covenants or restrictions.
Advances on the line of credit are payable on demand and bear interest at the
bank's prime rate. The line is secured by the Company's deposits with the bank.

                                       17
<PAGE>   18
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


         In March 1998, the Company sold 5,038,000 shares of its common stock in
conjunction with its IPO. The initial offering price was $16.00 per share with
proceeds to the Company of $74.9 million, net of underwriting discount.

         The Company's cash balance on June 30, 1998 was $39.9 million, a net
increase of $38.8 million from December 31, 1997. This increase was primarily
the result of net cash provided by operations of $10.3 million and net financing
activities of $73.2 million, which was offset by net cash used in investing
activities of $44.8 million.

         The Company's current capital expenditure budget for the next 12 months
is approximately $1.3 million. However, the Company intends to expand its
business through the acquisition or development of racing-related businesses and
properties. The Company currently has no agreements with respect to any
acquisitions, but it regularly engages in discussions relating to potential
acquisitions. The Company believes that the proceeds of the IPO, cash flow from
operations and available borrowings under its bank facilities will be sufficient
to fund these anticipated capital expenditures and other cash needs.

YEAR 2000 COMPLIANCE

         The Company does not expect that the cost of converting its computer
systems to year 2000 compliance to have a material adverse effect on the
Company's overall results of operations or cash flows. The Company believes that
it will be able to achieve year 2000 compliance by the end of 1999, and does not
currently anticipate any disruption in its operations as the result of any
failure by the Company to be in compliance. Total costs relating to year 2000
compliance for the Company is expected to be approximately $35,000 to $50,000.
The Company does not currently have any information concerning the year 2000
compliance status of its suppliers and customers.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         Except for the historical information contained herein, certain matters
discussed in this Form 10-Q are forward-looking statements which involve risks
and uncertainties that could cause actual results to differ materially from
those predicted in the forward-looking statements. The following factors, among
others, in some cases have affected and could cause actual results and plans for
future periods to differ materially from those expressed or implied in any such
forward looking statements: competition in the sports and entertainment
industry, participation by race teams, continued industry sponsorship, continued
participation by suppliers and event promoters, regulation of tobacco and
alcohol advertising and sponsorship, competition by the Indy Racing League, and
liability for personal injuries.

                                       18
<PAGE>   19
                      CHAMPIONSHIP AUTO RACING TEAMS, INC.

                           PART II - OTHER INFORMATION

Item 6.           Exhibits and Reports on Form 8-K.
    (a)   Exhibits.
                  The following exhibits are filed herewith.

             EXHIBIT NUMBER                  DESCRIPTION OF EXHIBIT
             --------------                  ----------------------

                  10.1           Marketing Representation Agreement between ISL
                                 Marketing AG and the Company dated June 24,
                                 1998 (incorporated by reference to Exhibit 10.1
                                 to the Current Report on Form 8 -K filed June
                                 29, 1998 - certain portions have been omitted
                                 and filed separately with the Commission
                                 pursuant to a request for confidential
                                 treatment).

                  27.1           Financial Data Schedule


    (b)   Reports on Form 8-K.
                  A current report on Form 8-K was filed on June 29, 1998,
                  reporting the Marketing Representation Agreement with ISL
                  Marketing AG and the Company.



    (c)   Other.
                  Any matter to be brought before the Company's 1999 annual
                  meeting of stockholders shall be set forth in a notice,
                  delivered to the Company's Secretary, on or prior to
                  February 22, 1999. The Company intends to exercise
                  discretionary voting authority on all matters brought before
                  such meeting as to which advance notice was not properly
                  delivered to the Company.

                                       19
<PAGE>   20
                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        CHAMPIONSHIP AUTO RACING TEAMS, INC.


Date:   8/13/98                         By: /s/ Randy K. Dzierzawski
      ----------------                      --------------------------------

                                            Randy K. Dzierzawski
                                            Chief Financial Officer

                                       20